A common ethical argument for investment by multinational corporations is that poorer countries gain from access to more modern technologies. The literature on this topic is vast and often technical, but there is little question as to the gain that poorer states receive when they are exposed to foreign multinationals. If a multinational corporation is going to use domestic suppliers, which is typically more efficient than having to ship everything, then some technology sharing is both inevitable and desirable.

Economic Growth

The simplest and most obvious indicator of technology diffusion and transfer is the improvement of production, exports and basic economic growth. Sarah Yueting Tong of the University of Hong Kong writes that, at least in China, a very common indicator of technology diffusion is improved exports and general economic development over time. The very act of absorbing foreign technologies means that, at least over time, production will improve.

Prices

Political economists Garrick Blalock and Paul Gertler at Cornell hold that lower export prices are an important indicator of technological diffusion. This is a result of the greater competition that the new technology has provided to the host economy. Once the new technology is absorbed by the host economy, it is often put to use making products that the multinational corporation needs, hence increasing competition both domestically and abroad, and generally lowering the prices of the relevant exports as a result. The basic point here is that multinational corporations have a good reason to share technology with their suppliers and complimentary firms in host countries, since it makes them more competitive.

Quality and Quantity

Economist Amy Jocelyn Glass at Texas A&M; University as well as Kemal Saggi of Vanderbilt have written expansively on the technology diffusion issue. For them, the issue is whether the host economy can use what they have been exposed to. Educational initiatives that specialize in these technical fields is an important indicator, as is the development of better local supply networks. It is fairly clear in the literature that the host country must develop the educational infrastructure necessary to take advantage of this new technology.

Issues

Multinational corporations seek profit and market share above all else. They, however, cannot keep their technology a secret. The host market will be exposed to what makes the firm and the products tick. This is the nature of technological diffusion. This kind of involuntary sharing of technology, however, is both in the interests of the multinational corporation and the host country. Prices are lowered because of better methods, exports are cheaper and hence more competitive, high paying technologically-oriented jobs are created and the country as a whole is inserted successfully into the global economy. The real issue is whether the country in question has the infrastructure to take advantage of this. If a country is dedicated to education and growth, then technology diffusion, in numerous studies published on all continents, strongly suggest they benefit the host economy immensely.

About the Author

Walter Johnson has more than 20 years experience as a professional writer. After serving in the United Stated Marine Corps for several years, he received his doctorate in history from the University of Nebraska. Focused on economic topics, Johnson reads Russian and has published in journals such as “The Salisbury Review,” "The Constantian" and “The Social Justice Review."